70 The origin and provenance of this "charter" are not stated but it may, I think, be taken to be a statement of the understanding of the Grains Board's members as to the reasons for its existence, at least in 1998.
71 The chairman's review in the 1998 annual report refers to seven years of growth in reserves and another operating surplus for the year under review. The profit and loss account shows a trading surplus of $4.27 million for the year (on sales of $228 million), compared with $6.976 million for the preceding year. Accumulated funds at year end were $21.556 million. The chairman's review also refers to a continuing focus on improving services to growers and customers. There is reference to a survey of both groups having shown that the "vast majority" wished the Grains Board to continue its role in the market place.
72 In the following year (the year ended 31 August 1999), sales revenues reached $475 million and there was a trading surplus of $6.359 million. The new chairman reported continued grower support for the Grains Board's marketing activities under the Act. In the year ended 31 August 2000, there was a net trading loss of $46 million and a net operating loss of more than $91 million. The plaintiff, having been appointed administrator, reported as follows in the documents sent to creditors in connection with the scheme of arrangement:
" 3.2 Key issues contributing to failure
The quantitative factors contributing to the loss of $90,000,000 for the year 2000 included:
· The substantial increase in grain purchases and sales activity and, in particular, the entry into unfavourable sales contracts, resulting in trading losses of at least $44,000,000, primarily incurred in relation to Canola ($19,000,000), Sorghum ($8,000,000) and Wheat ($12,000,000);
· Bad and doubtful debts of $15,000,000;
· Unfavourable foreign exchange movements leading to exposure on significant sales denominated in foreign currencies and foreign exchange losses of $20,000;
· Considerable overhead expenses of $10,000,000.
There were many other factors contributing to the poor financial performance, including:
· Entry into unprofitable joint venture arrangements, where NSWGB assumed responsibility for a greater proportion of losses incurred than profits realised;
· Involvement in both cash and pool trading activities, leading to confusion regarding the underlying objectives of NSWGB and the administration of growers' pools; and
· Managerial, accounting and control weaknesses resulting in an inability to accurately measure the financial performance and position of NSWGB over a long period.
While I have conducted initial enquiries, there remains considerable work to fully determine and attribute the reasons for the failure of NSWGB. I refer to this matter again towards the end of this Explanatory Statement."
73 There seems no doubt that the Grains Board did engage in extensive trading and that much of its trading was speculative. But it did so in the performance of its functions as its members apparently saw them.
74 One notable feature of the annual reports is the emphasis they place on both growers and customers as groups whose interests the Grains Board sought to foster. Growers no doubt wished prices to be high, while customers wished them to be low. The Grains Board could never fully accommodate the desires of both groups. The interests it was intended to promote and serve in the pursuit of its activities do not seem to have been clearly articulated. This is particularly so in light of the fact that the Act makes no provision as to ownership or distribution of profits. It is not possible to conclude that the Grains Board was a body intended to serve the interests of growers, at least in any direct sense. The aim was rather to produce benefits to the State through orderly and coordinated marketing, with concomitant benefits, no doubt, to both growers and customers who were spared the need to engage in direct negotiation and contracting on what would otherwise be a fragmented and diversified basis in which market power of particular parties might be exercised to the full, unchecked by what, on one view, would be the stabilising influence of the centralised system based on pooling and supported by statutory vesting.
75 I do not lose sight of the fact that the general complexion of the Grains Board changed in late 2000 when the day to day grain marketing functions were sold to Grainco Australia Ltd and the plaintiff was appointed administrator under s.31 of the Grain Marketing Act. The arrangement under s.80 of the Act followed in the latter part of 2001. Despite these developments, the basic statutory scheme was left largely intact, although with some adjustments effected by the Grain Marketing Amendment Act 2001 which received the Royal Assent on 14 December 2001. It was that Act which confined the Grain Board's functions to barley, canola and grain sorghum and fixed 1 October 2005 as the date beyond which the statutory vesting of commodities in the Grains Board would not be continued. Neither those changes nor the appointment of the plaintiff under s.31 did anything to alter the Grain Board's substantive powers and functions as they presently exist. The statutory framework continues, albeit in relation to a confined group of commodities and for a limited period, with the plaintiff as administrator, instead of its members, exercising the functions of the Grains Board.
Marketing board models
76 One type of pooled marketing arrangement is exemplified by the Scottish Milk Marketing Board and the Honey Pool of Western Australia, another by the COD.
77 The Scottish Board was formed under statutory provisions enabling producers to obtain the benefits of centralised marketing for their product. The particular board was brought into existence by the legislation through a decision of producers in the particular locality. The board consisted of elected producers. Alteration of the scheme required the approval of two-thirds of votes cast by producers. The scheme could be terminated by a vote of producers. There was compulsion upon producers in that those in the particular area were not permitted to sell except through the scheme. Producers were entitled to share in surplus funds and might be required to contribute on any winding up. The case was clearly one of a compulsory producers' co-operative.
78 The Honey Pool of Western Australia was a voluntary arrangement under which owners of honey (whether or not producers) might elect to sell on a pooled basis. The board of directors was appointed by the Governor, as to one member on the nomination of a particular farmers' co-operative and as to the others after election by participants. Profit making was expressly precluded, as was the payment of dividends. On a winding up, any surplus was distributable in a defined way to persons who had been participants in the last five years. This was a case of a voluntary orderly marketing scheme without coercive powers. Furthermore, there was nothing in the legislation to show that any public object was sought to be achieved. The body was established, in the words of Olney J, "for the convenience and benefit of the participants".
79 The COD was a quite different body. The statutory scheme in that case did not contain any mechanism for winding up. There was no indication that its purposes included the making of profits or capital gains to be devoted to participating producers. The COD was given by statute what Gibbs J described as "exceptional powers to direct and control the affairs of others for the purposes of the State and in the interests of the community and not for individual profit or gain". As with the Honey Pool, although Board members were formally appointed by the Minister, appointees were first nominated or elected by participant groups. The authority represented by powers of the COD did not in any sense derive from the growers; they derived from the State.
Conclusions in relation of the Grains Board
80 The Grains Board created by the Grain Marketing Act cannot be regarded as comparable with the Scottish Milk Board or the Honey Pool of Western Australia. The much closer and more striking analogy is with the COD.
81 Although the Grains Board's annual reports identify producers as an important constituency, there is also a strong emphasis on serving the interests of customers. The New South Wales Farmers' Association plays a limited role by nominating panels from which members of the Grains Board and the Consultative Committee are appointed. This falls short of any form of direct participation by producers. As individuals, they have no equity interests and play no part in the composition or decisions of the Grains Board. Their role is confined to that of creditors to whom payment rights accrue by virtue of vesting and delivery of their crops. A poll of producers may provide a basis on which the Minister delivers to the Governor a certificate which, in turn, causes the Governor to direct that the affairs of the Grains Board be wound up. But producers are in no sense beneficiaries of or participants in any such winding up. They are merely given an inconclusive say on the question of continuation of the Grains Board.
82 The Grains Board's monopoly position is underwritten by statutory compulsion and coercive powers. A form of compulsory acquisition of commodities is to continue in New South Wales until 1 October 2005, with the Grains Board made the owner of all commodities, regardless of the wishes of producers, subject to an obligation to make payment against delivery. There are no doubt elements of intended benefit to growers in this system but its universal and compulsory nature shows that it does not exist solely for that purpose. The general function of the Grains Board, as stated in s.32, is to do "all things necessary for or incidental to achieving the purpose of improving the marketing of commodities in New South Wales". The emphasis is on the improvement of a particular field of enterprise within the State, without reference to any sectional interest. The objective seems quite clearly to be related to a public interest and to the welfare of the community. That impression is confirmed by the roles played by the Governor, the Minister and the Director-General, each of whom, as part of the executive government, participates in the effectuation of the purposes of the Act both by action and by oversight.
83 That the public interest is the guiding principle is also borne out by the provisions in Part 8 of the Act. The Grains Board and its authorised officers are armed with powers of a kind that are exercisable only by the state, including prosecutorial powers and powers to search and seize. These are hallmarks of the authority of the state.
84 In my judgment, the nature of the Grains Board is precisely summed up in words used by Gibbs J in the Fruit Marketing case (above), at 582-3, which I have already quoted. I also adopt, as entirely applicable to this case, the statement of Smithers J at first instance in the Fruit Marketing case quoted in the judgment of Mason and Wilson JJ (at 585):
"To my mind the central and arresting feature of the COD is the nature and extent of its duties, functions and powers in the matter of issuing commands inconsistent with the ordinary rights of citizens in property and commerce to implement the intention of Parliament that marketing of fruit be organised marketing."
85 The considerations that led in the Fruit Marketing case to the conclusion that the COD was an authority of the State are present in this case. When the propositions stated by Hill J in the Bank of Western Australia case are applied to the circumstances of the Grains Board, propositions 4, 5 and 7 are seen to apply and to indicate clearly a conclusion of "public authority" status.
86 I therefore hold that the Grains Board is a "public authority" as referred to in paragraph (a) of the definition of "exempt public authority" in s.9 of the Corporations Law, with the result that it is an "exempt public authority" and is not a "corporation" within the meaning of s.57A.
Consequences of the Grains Board's not being a "corporation"
87 This finding that the Grains Board is not a "corporation" means that jurisdiction sourced in ss.596A and 596B of the Corporations Law is not available in relation to the affairs of the Grains Board via s.4B of the Grain Marketing Act. The plaintiff is therefore not entitled to the relief sought in the originating process.
88 While that is sufficient to dispose of these proceedings, the possibility that my conclusion on the "corporation" question may be reviewed on appeal makes it desirable that I deal with the remaining issues.
"Eligible Applicant"
89 The term "eligible applicant" is defined by s.9 of the Corporations Law as follows:
"eligible applicant" , in relation to a corporation, means:
(a) the Commission; or
(b) a liquidator or provisional liquidator of the corporation; or
(c) an administrator of the corporation; or
(d) an administrator of a deed of company arrangement executed by the corporation; or
(e) a person authorised in writing by the Commission to make:
(i) applications under the Division of Part 5.9 in which the expression occurs; or
(ii) such an application in relation to the corporation."
90 This definition must, for present purposes, be read in the modified way dictated by clause 4(1)(a) of the Grain Marketing Regulation 2001. The references to "the Commission" are to be read as references to the Minister. If the plaintiff is to be regarded as an "eligible applicant", it must be seen that he has been authorised in writing by the Minister in the way referred to in paragraph (e) of the definition of that term.
91 There are in evidence three letters from the Minister to the plaintiff relevant to his "eligible applicant" status. The first is dated 29 November 2001 but, because it is expressed by reference to provisions of the Corporations Act upon which the plaintiff does not seek to rely, it may be disregarded. The other letters are dated 1 May 2002 and 14 August 2002. They are as follows:
" 1 May 2002
I refer to your letters of 21 November 2001 and 5 April 2002, concerning your request for authorisation to conduct public examinations.
Pursuant to section 4(B)(3) of the Grain Marketing Act 1991 and section 4(1)(a) of the Grain Marketing Regulation 2001, I hereby authorise you to make application as an eligible applicant under section 596A and 596B of the Corporations Law, to conduct examinations concerning the examinable affairs of the NSW Grains Board.
I understand that the persons you propose to examine are identified in your letter to me of 21 November 2001, a copy of which is attached."
" 14 August 2002
I refer to your letter of 12 July 2002, which in turn makes reference to the following correspondence between us:
· your letter to me dated 21 November 2001;
· my letter in response dated 29 November 2001;
· your letter to me dated 5 April 2002;
· my letter in response dated 1 May 2002.
Pursuant to section 4(b)(3) of the Grain Marketing Act 1991 and section 4(1)(a) of the Grain Marketing Regulation 2001 , I hereby authorise you, in your capacity as Administrator of the NSW Grains Board, and as the Scheme Administrator appointed by order of the Supreme Court of New South Wales on 24 October 2001, to make application as an eligible applicant under sections 596A and 596B of the Corporations Law, to conduct examinations concerning the examinable affairs of the NSW Grains Board.
I understand that the persons you propose to examine are identified in your letters to me of 21 November 2001 and 12 July 2002, copies of which are attached."
92 Despite the incorrect references to "section 4(B)(3)" in one case and "section 4(b)(3)" in the other, each of these letters would constitute an authority in writing with sub-paragraph (e)(i) of the s.9 definition sufficient to make the plaintiff an "eligible applicant" in relation to the Grains Board, if the Grains Board were a "corporation".